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With your credit in tatters, you will have to be patient for a while before you can achieve the things that you have been wanting for so long. You made the right move when you hired Chapter 7 attorneys to take control of your finances. Unfortunately, after bankruptcy you will have to wait on some things.
1. Watching Bankruptcy Disappear From Your Credit Report
Bankruptcy can stay on your credit report for up to ten years, negatively impacting your score and requiring lenders to take a long, hard look at you before they’ll be willing to give you even a principal loan. However, after those ten years, you will be free and clear as bankruptcy will no longer appear.
2. Repairing Your Credit
There is no perfect rule of thumb for how long it will take to repair your credit after Chapter 7 bankruptcy, although by the ten-year mark described above, it should be bright and new again. Instead, credit repair is based on a range of different factors. How well you pay off current loans, including your house payments (if you’ve managed to stay home), is at the top of the list and should be a priority in your new budget.
3. Applying for an Unsecured Credit Card
Immediately after you file for bankruptcy with your Chapter 7 attorneys, you’ll probably see a lot of credit card offers that claim to help you rebuild your credit. It sounds right, doesn’t it? Unfortunately, these credit card “offers” come with substantial conditions. They know that you can’t file for Chapter 7 bankruptcy again for eight years, and as such, you’ll need to find a way to make payments on these high-interest cards. Worse, if you cancel the card you’ll be hit with higher fees, lower limits and a hit to your credit. Instead, wait until you’ve raised your credit score to around 700 before applying for a new card. When trying to build your credit, try options like secured credit cards; You deposit money into a specific account at the bank, and the bank offers you a “loan” of 50-100% of that amount. Using this card every month will help to rebuild your credit faster.
4. Buying a Home
Seems like the perfect time to go house hunting, doesn’t it? With no debt hanging over your head after a Chapter 7 discharge, it may seem as though you have more of each paycheck to devote to things like a new home. Unfortunately, you can’t jump in right now. If you’re using a VA loan, you must wait two years from the time you filed for bankruptcy before attempting to buy a home. More traditional loans will require a waiting period of four years. Don’t despair though. In the meantime, you can start making your down payment. Take the amount you want to dedicate to a house down payment each month and put it in an account dedicated to buying a house. In four years, you will have a substantial down payment which will make it much easier for you to get the loan you want.
5. Jumping Back Into Your Old Lifestyle
You have more money available now because you’ve reduced or eliminated your debt, but that doesn’t mean you should go straight back to your old lifestyle. Remember, those excessive spending habits are what led to your bankruptcy in the first place. Take time to develop good spending habits and wait for your employment status and your income to change before trying to meet those standards again.
Filing for bankruptcy after retaining Chapter 7 attorneys is a scary time in your life. When it’s gone it can be even more difficult to rebuild. For more tips and tricks on managing your finances after bankruptcy, contact us today.
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